US Tariff Overview

In his inaugural address, Donald Trump promised to “tariff and tax foreign countries to enrich our citizens,” part of a large-scale effort by the administration to reduce the federal deficit. However, the tariffs implemented by the executive branch have caused turmoil on Wall Street, with markets fluctuating rapidly and generally lowering stock prices.

Oceanic ports facilitate most international trade in the United States.

According to Rodney Sullivan, an economist at the University of Virginia’s Darden School of Business, a tariff is considered to be a tax imposed by a government on goods imported from other countries. Although primarily a revenue source, Sullivan says that tariffs can also be used to protect domestic industries and influence foreign affairs. The costs associated with paying a tariff are at first paid by the entity that imports a good, but that cost is almost always passed along to consumers via higher retail prices. Sullivan adds that tariffs have historically been a major source of government revenue, but newer methods (such as federal income taxes) have made tariff duties largely unimportant regarding government income.

The first specific tariff threat originating from the White House came less than a week after Trump’s inauguration. After refusing to accept two US military deportation flights, the South American nation of Colombia was threatened with a 25% blanket tariff. A blanket tariff refers to a customs duty imposed against nearly every product from a country, and is less common than more precise tariffs used to protect key industries (such as semiconductors). In response to the American tariffs, Colombian President Gustavo Petro unveiled an identical 25% retaliatory tariff (which ultimately became a popular strategy amongst countries facing US tariffs). Despite a fiery and sprawling rant posted to the social media site X (formerly known as Twitter), which included tangents about South American and ancient history as well as Petro seemingly accusing Trump of trying to “overthrow” him, both countries eventually came to a diplomatic solution which involved both the original and retaliatory tariffs being discarded. This public spectacle helped to generate much of the current public discourse around American tariffs.

Despite warning Canada and Mexico that tariffs would potentially be levied if certain actions (mostly related to border security) were not taken, the Trump administration declined to issue new tariffs that lasted more than several hours. In this context, the idea for a “Liberation Day” began to emerge as a way of imposing tariffs against dozens of countries and administrative regions at once. On April 2, 2025, the White House did just that, pushing the announcement late into the afternoon to avoid a large reaction from Wall Street.

The “Liberation Day” round of tariffs included a 34% tariff on China, a 20% tariff on the European Union, and similar tariffs against countries such as South Korea, Japan, and India. Also included in the list were various small territories that have essentially no trade with the United States, such as Svalbard and Jan Mayen, Christmas Island, and the remote Heard and McDonald Islands, home to zero humans. Why these entities were included is publicly unknown.

Overall, tariffs can be both protectors of domestic industry and costly hindrances to free trade. Add this to the reality of complex geopolitical relationships, and the true gravity of modern macroeconomics becomes frighteningly colossal. The financial health of the global economy is increasingly unpredictable.

Standardized shipping containers help to streamline international commerce.